We find that more targeting increases competition and reduces the websites' profits, but yet in equilibrium websites choose maximum targeting as they cannot credibly commit to low targeting. [emphasis added] A privacy protection policy can be beneficial for both consumers and websites.

If websites could coordinate on targeting, proposition 1 suggests that they might want to agree to keep targeting to a minimum. However, we next show that individually, websites win by increasing the accuracy of targeting over that of their competitors, so that in the non- cooperative equilibrium, maximal targeting results.

But I don't buy the conclusion that web sites are
forced to get creepier and creepier, and less and
less profitable, in the absence of certain privacy
regulations.

The missing piece here—and I know it makes the
model much more complicated—is that on the real
web, the "consumers" are actually people who can switch
browsers or install privacy tools to adjust the level
at which they are targeted.

And the web sites have more options than just "target
more" or "target less". For example, another move that's
available to a site is to encourage the use of
anti-tracking technology. As a webmaster, you could
identify the users of privacy tools and offer them some
kind of bonus content, such as single-page views of
long paginated articles, full interview transcripts, or
a forum for submitting questions to ask in upcoming
interviews. You don't have to wait for regulators to
pull you out of the death spiral of creepy.